Spain’s debt rating was cut to one level above junk by Standard & Poor’s, which cited mounting economic and political risks.

The country was lowered two levels to BBB- from BBB+, New York-based S&P said today in a statement. S&P assigned a negative outlook on the nation’s debt.

The downgrade comes after Spain announced a fifth austerity package in less than a year and published details of stress tests of its banks. Creditworthiness concerns have grown since the government requested as much as 100-billion euros (US$129-billion) in European Union aid to shore up its lenders and amid signals that the deficit target is in jeopardy.

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Investors are shunning the nation’s securities as Prime Minister Mariano Rajoy weighs a second bailout amid a deepening recession. Rajoy has held off on a decision about whether to request European Central Bank and EU bond-buying to lower borrowing costs. He’s called for more details on what would be demanded of Spain in return for the support.

The yield on Spain’s 10-year benchmark bond closed at 5.8% today, compared with a record of 7.75% on July 25, a day after Spain signed a memorandum of understanding awarding it a credit line for its banks.

Spain’s financing needs are increasing along with its costs. It plans to borrow 207.2-billion euros next year, pushing its debt load to 90.5% of economic output as the state absorbs the cost of bailing out banks and the power system. The rate was 36% in 2007, before a 10-year real-estate boom ended, derailing public finances.

This year’s budget deficit will be 7.4% of gross domestic product, Budget Minister Cristobal Montoro said Sept. 29. Even so, Spain’s 6.3% target will be met because it can exclude the cost of the bank rescue, he said. Spain’s budget gap was the third-largest in the euro zone last year at 8.96 of GDP.